AT&T Revenues Influenced By Strong iPhone Sales - InformationWeek

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AT&T Revenues Influenced By Strong iPhone Sales

However, subsidies cost the telecom some $450 million in profits in the quarter.

Apple's iPhone represented a mixed blessing and curse for AT&T as the nation's largest telecommunications company Wednesday reported higher revenue but lower profits for its fourth quarter.

The iPhone, heavily subsidized by AT&T, accounted for 1.9 million activations in the quarter -- 40% of them were new AT&T customers. However, the AT&T subsidies cost the telecom some $450 million in profits in the quarter. That isn't necessarily bad news, though, as AT&T expects to get all that back and more to boot as data-hungry iPhone users continue to sign up for more and more data.

"The iPhone 3G continues to deliver high-value subscribers with significantly higher ARPU (average month revenues per subscriber) and lower churn than AT&T's postpaid subscriber average," the company said.

Like Verizon Communications, which reported its earnings Tuesday, AT&T's rosy financial report thumbed its nose at the sinking nationwide economy, based largely on its wireless operations. AT&T also reported an acceleration in its U-verse TV operation, recording a net gain of 264,000 subscribers in the quarter. Wireline IP data revenue also registered an impressive 14.2% growth.

The growth areas more than covered the decline in wireline revenue as customers continued to drop their landlines and move to wireless.

Randall Stephenson, AT&T's chairman and CEO, said he was pleased with the results. "Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress," he said in a statement.

"Looking ahead," he added, "while we are cautious about the economic environment, AT&T is well positioned with a strong balance sheet and premier operational assets and I am very confident in our ability to execute."

From the beginning of his tenure as head of AT&T, Stephenson has bet heavily on the iPhone, and it appears to be paying off. AT&T's business plan for the iPhone called for heavy up-front subsidies for the handset to be followed by a gradual increase in subscription and data revenue by iPhone users. While AT&T's profits took a $450 million hit in the quarter, its wireless data-services revenue surged 51%. AT&T said its wireless data revenue totaled $3.2 billion in the quarter.

The jump in data services can't be entirely attributed to the iPhone, but most of it likely is. AT&T said that its exclusive deal to market the iPhone in the United States "continues to deliver high-value subscribers with ARPU approximately 1.6 times higher and churn rates significantly lower than the company's overall postpaid subscriber base."

AT&T can also take some comfort in the fact that Verizon Wireless' once-feared "iPhone killer" -- the BlackBerry Storm -- has received very mixed reviews by consumers and hasn't been a robust seller for Verizon.

For the quarter, AT&T's net income dropped to $2.4 billion from the year-earlier quarter figure of $3.14 billion. Revenue was $31.1 billion, which represented a 2.4% gain over the like quarter in 2007.

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